Recon Technology, Ltd. Reports Fiscal Year 2016 First Quarter Financial Results

Nov 13, 2015, 06:30 ET from Recon Technology, Ltd.

BEIJING, Nov. 13, 2015 /PRNewswire/ -- Recon Technology, Ltd. (NASDAQ: RCON) ("Recon" or the "Company"), a leading independent oilfield services provider operating primarily in China, today reported its financial results for the first quarter of fiscal year 2016, which ended September 30, 2015.

Q1 FY2016 Financial Highlights:  

Total revenues for the first quarter of FY2016 were RMB3.59 million ($0.57 million), a decrease of 16.5% as compared to the same period last fiscal year.

  • Gross profit for the first quarter of FY2016 was RMB0.40 million ($0.06 million), a decrease of 34.7% as compared to the same period last fiscal year. Gross margin was 11.2% for the first quarter of FY2016, as compared to 14.3% for the same period last fiscal year.
  • Operating loss was RMB8.68 million ($1.37 million) for the first quarter of FY2016, compared to RMB4.45 million for the same period last fiscal year.
  • Net loss attributable to Recon for the first quarter of FY2016 was RMB8.85 million ($1.39 million), or RMB1.63 ($0.26) per diluted share, compared to RMB4.16 million, or RMB0.87 per diluted share, for the same period last fiscal year.
  • Adjusted EBITDA (non-GAAP) was negative RMB7.00 million ($1.10 million) for the first quarter of FY2016, compared to negative RMB2.27 million for the same period last fiscal year.
  • Adjusted net loss attributable to Recon was RMB7.52 million ($1.18 million), or RMB1.38 ($0.22) per diluted shares, for the first quarter of FY2016, compared to RMB2.66 million, or RMB0.56 per diluted share, for the same period last fiscal year.

Mr. Shenping Yin, Chairman and CEO of Recon stated, "During the three-month period ended September 30, 2015, we saw a continued downturn in oil and gas prices. Our customers still have not increased their investment in the upstream business. However, we are actively seeking new breakthrough business opportunities and we are confident for our future growth."

Q1 FY2016 Financial Results



For the Three Months Ended September 30,



2014


2015


2015


%

(thousands)


RMB 


RMB


USD


Change

Revenues


RMB

4,304


RMB

3,594


$

566


-16.5%

Hardware and software



4,246



3,481



548


-18.0%

Service



58



113



18


93.5%

Hardware and software - related parties



-



-



-


NM

Gross margin



14.3%



11.2%



11.2%


-3.1%

Operating (loss) margin



-103.3%



-241.5%



-241.5%


NM

Net income (loss) attributable to RCON



(4,162)



(8,849)



(1,393)


NM

Revenues

For the three months ended September 30, 2015, total revenues decreased by RMB0.71 million, or 16.5%, to RMB3.59 million ($0.57 million) from RMB4.30 million for the same period last fiscal year mainly as a result of decreased sales of automation software. Revenues from non-related party hardware and software sales decreased by RMB0.76 million, or 18.0%, to RMB3.48 million ($0.55 million) for the three months ended September 30, 2015, as compared to RMB4.25 million for the same period of last fiscal year. The Company did not book revenues from related-party hardware and software sales for the three months ended September 30, for either this fiscal year or last fiscal year.

Gross profit and gross margin 

Cost of revenues decreased by RMB0.50 million, or 13.5%, to RMB3.19 million ($0.50 million) for the three months ended September 30, 2015 from RMB3.69 million for the same period of last fiscal year. As a percentage of revenues, cost of revenues increased slightly to 88.8% for the three months ended September 30, 2015 from 85.7% for the same period last fiscal year.

Gross profit decreased by RMB0.21 million, or 34.7%, to RMB0.40 million ($0.06 million) for the three months ended September 30, 2015 from RMB0.62 million for the same period last fiscal year. Overall gross margin was 11.2% for the three months ended September 30, 2015, compared to 14.3% for the same period last fiscal year.

Operating income (loss) and operating (loss) margin 

Selling and distribution expenses increased by RMB0.41 million, or 58.8%, to RMB1.11 million ($0.18 million) for the three months ended September 30, 2015 from RMB0.70 million for the same period last fiscal year. General and administrative expenses increased by RMB2.47 million, or 66.8%, to RMB6.18 million ($0.97 million) for the three months ended September 30, 2015 from RMB3.70 million for the same period last fiscal year. Research and development expenses increased by RMB1.14 million, or 173.0%, to RMB1.79 million ($0.28 million) for the three months ended September 30, 2015 from RMB0.66 million for the same period of last fiscal year as a result of increased research and development effort on downhole service tools. Total operating expenses increased by RMB4.02 million, or 79.5%, to RMB9.08 million ($1.43 million) for the three months ended September 30, 2015 from RMB5.06 million for the same period during last fiscal year.

Operating loss was RMB8.68 million ($1.37 million) for the three months ended September 30, 2015, compared to RMB4.45 million for the same period last fiscal year. Operating loss margin was 241.5% for the three months ended September 30, 2015, compared to 103.3% for the same period last fiscal year. 

Net income (loss)

Net loss to our shareholders for the three months ended September 30, 2015 was RMB8.85 million ($1.39 million), or RMB1.63 ($0.26) per diluted share, compared to RMB4.16 million, or RMB0.87 per diluted share, for the same period last fiscal year.

Non-GAAP Measures



For the Three Months Ended September 30,



2014


2015


2015

(thousands)


RMB


RMB


USD

Net income (loss)


 RMB

(4,162)


 RMB

(8,849)


$

(1,393)

Provision for income taxes



30



(16)



(3)

Interest expenses and foreign currency adjustment



244



279



44

Change in fair value of warrants liability



(274)



-



-

Restricted shares issued for consulting services



1,171



202



32

Stock compensation expense



601



1,127



177

Depreciation and amortization



121



260



41

Adjusted EBITDA



(2,269)



(6,997)



(1,102)











Net income (loss) attributable to RCON



(4,162)



(8,849)



(1,393)

Change in fair value of warrants liability



(274)



-



-

Restricted shares issued for consulting services



1,171



202



32

Stock compensation expense



601



1,127



177

Adjusted net income (loss) attributalbe to RCON



(2,664)



(7,520)



(1,184)

Adjusted earnings per diluted share



(0.56)



(1.38)



(0.22)

Adjusted EBITDA (non-GAAP), which we define as net income (loss) adjusted for income tax expense (benefit), interest expense, change in fair value of warrants liability, non-cash stock compensation expense, depreciation and amortization, was negative RMB7.00 million ($1.10 million) for the three months ended September 30, 2015, compared to negative RMB2.27 million for the same period last fiscal year. This was mainly due to decreased revenue and increased research and development expenses. Adjusted net loss attributable to our shareholders was RMB7.52 million ($1.18 million), or RMB1.38 ($0.22) per diluted shares, for the three months ended September 30, 2015, compared to RMB2.66 million, or RMB0.56 per diluted share, for the same period last fiscal year.

Financial Position

As of September 30, 2015, the Company had cash and cash equivalents of RMB3.88 million ($0.61 million), short-term bank loans of RMB7.00 million ($1.10 million), and short-term borrowings from related parties of RMB9.41 million ($1.48 million), compared to RMB12.34 million, RMB7.00 million, and RMB16.92 million, respectively, at June 30, 2015. Working capital as of September 30, 2015 was RMB66.48 million ($10.46 million) as compared to RMB72.43 million at June 30, 2015. Net cash used in operating activities was RMB0.97 million ($0.15 million) for the three months ended September 30, 2015, compared to RMB9.97 million for the same period of last fiscal year. Net cash used in investing activities was RMB0.47 million ($0.07 million) for the three months ended September 30, 2015, compared to RMB0.10 million for the same period of last fiscal year. Net cash used in financing activities was RMB7.13 million ($1.12 million) for the three months ended September 30, 2015, compared to RMB2.00 million for the same period last fiscal year. During the three-month period ended September 30, 2015, we repaid RMB9.10 million ($1.43 million) in short-term borrowings to two related parties and received RMB1.80 million ($0.28 million) in short-term borrowings from one related party.

Recent Development 

On September 22, 2015, the Company entered into an amendment to the Letter Agreement with Maxim Group LLC, dated January 28, 2015, extending the term of the Letter Agreement for an additional six months, or until February 29, 2016. As of November 13, 2015, a total of 313,071 shares have been issued under this Letter Agreement. 

On August 6, 2015, the Company announced that it will set up a scientific research and training base (the "Workstation") in collaboration with the College of Information Science & Technology of Nanjing Agricultural University ("CIST-NAU").  With a current enrollment of more than 26,400 full-time students, including more than 9,400 full-time master's and doctoral students, NAU is a premier university under the administration of Ministry of Education. Often ranked among the nation's top 100 universities, NAU is a national key university with both Project 211 and Project 985 designations

On July 29, 2015, the Company entered into a memorandum of understanding (the "MOU") with Qinghai Huayou Downhole Technologies Co., Ltd. ("QHHY"), a PRC corporation and oilfield service provider in Qinghai province, to acquire a 100% stake in QHHY with a combination of cash and the Company stock (the "Transaction"). The terms and conditions of a definitive agreement are currently being negotiated between the two parties. Further details will be disclosed upon completion of a definitive agreement.

About Recon

Recon Technology, Ltd. is China's first independent oil and gas field service company listed on NASDAQ (RCON). Working closely with leading global partners, Recon has achieved rapid growth supplying China's largest oil and gas exploration companies, including Sinopec and China National Petroleum Corporation, with advanced automated technologies, efficient gathering and transportation equipment and reservoir stimulation measures. The solutions Recon provides are aimed at increasing gas and petroleum extraction levels, reducing impurities, improving safety and lowering production costs. For additional information, please visit www.recon.cn.

Cautionary Statements

Statements made in this release with respect to Recon's current plans, estimates, strategies and beliefs and other statements that are not historical facts are forward-looking statements about the future performance of Recon. Forward-looking statements include, but are not limited to, those statements using words such as "believe," "expect," "plans," "strategy," "prospects," "forecast," "estimate," "project," "anticipate," "aim," "intend," "seek," "may," "might," "could" or "should," and words of similar meaning in connection with a discussion of future operations, financial performance, events or conditions. From time to time, oral or written forward-looking statements may also be included in other materials released to the public. These statements are based on management's assumptions, judgments and beliefs in light of the information currently available to it. Recon cautions investors that a number of important risks and uncertainties could cause actual results to differ materially from those discussed in the forward-looking statements, including but not limited to, product and service demand and acceptance, changes in technology, economic conditions, the impact of competition and pricing, government regulation, and other risks contained in reports filed by the company with the Securities and Exchange Commission. Therefore investors should not place undue reliance on such forward-looking statements. Actual results may differ significantly from those set forth in the forward-looking statements. 

All such forward-looking statements, whether written or oral, and whether made by or on behalf of the company, are expressly qualified by the cautionary statements and any other cautionary statements which may accompany the forward-looking statements. In addition, the company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof.

Contact

Recon Technology, Ltd.
Ivy Xia
Tel: +86-10-8494-5799
Email: info@recon.cn

Weitian Investor Relations
Tina Xiao
Tel: +1-917-609-0333
Email: tina.xiao@weitian-ir.com

RECON TECHNOLOGY, LTD

CONSOLIDATED BALANCE SHEETS











As of Jun 30,


As of Sep 30,


As of Sep 30,


2015


2015


2015

ASSETS

RMB


RMB


U.S. Dollars

Current assets









Cash and cash equivalents 

RMB

12,344,929


RMB

3,877,272


$

610,229

Notes receivable


4,205,530



3,227,580



507,976

Trade accounts receivable, net 


52,186,397



51,501,307



8,105,591

Trade accounts receivable- related parties, net


4,769,800



-



-

Inventories, net


10,845,007



11,876,883



1,869,257

Other receivables, net 


18,064,568



19,137,645



3,012,000

Other receivables- related parties


91,021



-



-

Purchase advances, net


18,622,538



17,410,721



2,740,206

Purchase advances- related parties


394,034



-



-

Prepaid expenses 


826,314



407,220



64,091

Prepaid expenses - related parties


420,000



210,000



33,051

Deferred tax asset


1,742,098



1,758,555



276,771

Total current assets


124,512,236



109,407,183



17,219,172










Property and equipment, net


2,666,953



2,877,450



452,871

Long-term trade accounts receivable, net


4,440,665



3,407,973



536,368

Long-term other receivable


2,729,033



2,056,776



323,708

Total Assets

RMB

134,348,887


RMB

117,749,382


$

18,532,119










LIABILITIES AND EQUITY 









Current liabilities









Short-term bank loans

RMB

7,000,000


RMB

7,000,000


$

1,101,703

Trade accounts payable


13,627,088



13,409,825



2,110,520

Trade accounts payable- related parties


3,528,705



3,273,879



515,263

Other payables 


2,103,057



1,794,205



282,383

Other payable- related parties


4,309,702



1,844,628



290,319

Deferred revenue


2,285,529



2,452,511



385,991

Advances from customers


529,700



370,984



58,388

Accrued payroll and employees' welfare


246,789



330,057



51,946

Accrued expenses


199,166



202,852



31,926

Taxes payable


1,153,216



2,660,650



418,749

Short-term borrowings - related parties


16,916,905



9,405,714



1,480,329

Deferred tax liability


180,186



180,186



28,359

Total current liabilities


52,080,043



42,925,491



6,755,876










Equity









Common stock, ($ 0.0185 U.S. dollar par value, 100,000,000
shares authorized; 5,427,946 and 5,438,763 shares issued and
outstanding as of June 30, 2015 and September 30, 2015,
respectively)


697,217



699,013



110,015

Additional paid-in capital


92,541,687



93,802,706



14,763,245

Appropriated retained earnings


4,148,929



4,148,929



652,984

Unappropriated retained earnings


(23,024,935)



(31,873,541)



(5,016,453)

Accumulated other comprehensive loss


(317,551)



(193,333)



(30,428)

Total shareholders' equity


74,045,347



66,583,774



10,479,363

Non-controlling interest


8,223,497



8,240,117



1,296,880

Total equity


82,268,844



74,823,891



11,776,243

Total Liabilities and Equity

RMB

134,348,887


RMB

117,749,382


$

18,532,119























RECON TECHNOLOGY, LTD


CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)













For the three months ended



September 30,



2014


2015


2015



RMB


RMB


USD












Revenues










Hardware and software

RMB

4,245,509


RMB

3,480,752


$

547,822


Service


58,491



113,208



17,817


Total revenues


4,304,000



3,593,960



565,639












Cost of revenues










Hardware and software

RMB

3,688,686


RMB

3,315,627


$

521,834


Provision for slow moving inventories


-



(123,332)



(19,411)


Total cost of revenues


3,688,686



3,192,295



502,423


Gross profit


615,314



401,665



63,216






















Selling and distribution expenses


700,790



1,112,670



175,119


General and administrative expenses


3,703,291



6,177,145



972,197


Research and development expenses


656,729



1,792,997



282,193


Operating expenses


5,060,810



9,082,812



1,429,509






















Loss from operations


(4,445,496)



(8,681,147)



(1,366,293)












Other income (expenses)










Subsidy income


214,703



49,000



7,712


Interest income


83,032



55,510



8,737


Interest expense


(241,844)



(277,824)



(43,726)


Change in fair value of warrants liability


274,399



-



-


Loss from foreign currency exchange


(2,074)



(938)



(148)


Other expense


(14,020)



(9,664)



(1,521)


Other income(expense)


314,196



(183,916)



(28,946)


Loss before income tax


(4,131,300)



(8,865,063)



(1,395,239)


Provision (benefit) for income tax


30,245



(16,457)



(2,590)


Net Loss


(4,161,545)



(8,848,606)



(1,392,649)












Less: Net loss attributable to non-controlling interest


-



-



-


Net loss attributable to Recon Technology, Ltd

RMB

(4,161,545)


RMB

(8,848,606)


$

(1,392,649)












Comprehensive loss










Net loss


(4,161,545)



(8,848,606)



(1,392,649)


Foreign currency translation adjustment


(802)



124,218



19,550


Comprehensive loss


(4,162,347)



(8,724,388)



(1,373,099)


Less: Comprehensive loss attributable to non-controlling interest


(41)



16,620



2,616


Comprehensive loss attributable to Recon Technology, Ltd

RMB

(4,162,306)


RMB

(8,741,008)


$

(1,375,715)












Loss per common share - basic

RMB

(0.87)


RMB

(1.63)


$

(0.26)












Weighted - average shares - basic


4,757,112



5,438,763



5,438,763












 

 

RECON TECHNOLOGY, LTD 

CONSOLIDATED STATEMENTS OF CASH FLOWS 











For the three months ended September


2014


2015


2015


RMB


RMB


U.S. Dollars










Cash flows from operating activities:









Net income (loss)

RMB

(4,161,545)


RMB

(8,848,606)


$

(1,392,649)

Adjustments to reconcile net income (loss) to net cash used
in operating activities:









Depreciation


121,347



259,768



40,884

Provision for doubtful accounts


(68,361)



2,109,926



332,073

Provision for slow moving inventories


-



(123,332)



(19,411)

Share based compensation


600,578



1,126,552



177,304

Deferred tax benefit (provision)


(2,034)



(16,458)



(2,590)

Change in fair value of warrants liability


(274,399)



-



-

Restricted shares issued for services


1,171,331



202,475



31,867

Changes in operating assets and liabilities:









Notes receivable


-



977,950



153,916

Trade accounts receivable


5,087,718



1,685,745



265,313

Trade accounts receivable-related parties


508,979



4,569,800



719,224

Inventories


(2,879,769)



(908,544)



(142,992)

Other receivable, net


(3,818,122)



(419,821)



(66,075)

Other receivables related parties, net


1,414,433



91,021



14,325

Purchase advance, net


(1,752,557)



(847,071)



(133,317)

Purchase advance-related party, net


(1,105,966)



394,034



62,015

Prepaid expense


(1,754,029)



216,619



34,093

Prepaid expense - related party, net


230,000



210,000



33,051

Trade accounts payable


(1,566,988)



(217,263)



(34,194)

Trade accounts payable-related parties


389,143



(254,826)



(40,106)

Other payables


(723,368)



(308,852)



(48,609)

Other payables-related parties


135,312



(2,465,074)



(387,968)

Deferred income


(283,306)



166,982



26,281

Advances from customers


(519,350)



(158,716)



(24,980)

Accrued payroll and employees' welfare


28,673



83,268



13,105

Accrued expenses


14,055



(7,505)



(1,181)

Taxes payable


(759,764)



1,507,434



237,249

Net cash used in operating activities


(9,967,989)



(974,494)



(153,372)










Cash flows from investing activities:









Purchase of property and equipment


(96,008)



(470,265)



(74,013)

Net cash used in investing activities


(96,008)



(470,265)



(74,013)










Cash flows from financing activities:









Repayments of short-term bank loans


(2,000,000)



-



-

Proceeds from short-term borrowings-related parties





1,800,000



283,295

Repayment of short-term borrowings-related parties





(9,100,000)



(1,432,214)

Proceeds from sale of common stock, net of issuance costs





165,823



26,098

Net cash provided by financing activities


(2,000,000)



(7,134,177)



(1,122,821)










Effect of exchange rate fluctuation on cash and cash
equivalents


(478)



111,279



17,514










Net decrease in cash and cash equivalents


(12,064,475)



(8,467,657)



(1,332,692)

Cash and cash equivalents at beginning of year


18,094,586



12,344,929



1,942,921

Cash and cash equivalents at end of year

RMB

6,030,111


RMB

3,877,272


$

610,229



















Supplemental cash flow information









Cash paid during the period for interest

RMB

230,035


RMB

277,823.74


$

43,726

Cash paid during the period for taxes

RMB

32,280


RMB

72,216.93


$

11,366










Non-cash investing and financing activities









Cancelation of  prior issuance of 40,625 shares of common stock
for professional services

RMB

1,002,721


RMB

-


$

-

Non-cash transaction for AR and loan payable offset

RMB

-


RMB

200,000.00


$

31,477











SOURCE Recon Technology, Ltd.



RELATED LINKS

http://www.recon.cn